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HomeMy WebLinkAbout2009-03-04 MinutesMinutes of the March 4, 2009 Audit Committee Meeting The following audit committee members were present: Tony Uth, Jr. Judy Jacobs Absent were: Alan Bryant Bobby Ferrell, Alderman The following City staff were present: Paul A. Becker, Finance Director Marsha Hertweck, Accounting Director Shelly Turberville, Accounting Manager Deborah Smallwood, Accounts Payable Clerk Vicki Deaton, Internal Auditor 1) The minutes from the December 19, 2008 audit committee meeting were approved by the audit committee members present. 2) Judy Jacobs, the new audit committee member, was welcomed to the committee. 3) Tony Uth was elected by the committee as the new audit committee chairman. Tony is currently the longest serving member of the committee. 4) Internal Audit's 2009 Audit Plan was presented to the committee. The Internal Auditor reminded everyone that the plan is subject to change and that items can be added at the request of the audit committee, the Finance Director, or the Mayor. The Internal Auditor told the committee that the Mayor's Chief of Staff asked for several performance audits to be included in the plan — IT and Water and Sewer. These are scheduled for later in the year and the scope will be narrowed for the audits based on input from the administration. There was discussion about which audits are follow ups to previous audits and which audits are first time audits. The Internal Auditor explained that there is not a set rotation of audits. We have tried to allow for flexibility in this plan and past audit plans. There was discussion about the FEMA Ice Storm Project, how the Internal Auditor is involved, and the time frame for that project. The project is being managed and organized by the Accounting division, with assistance and monitoring by the Internal Auditor. There was also some clarification about the audit schedules which are prepared for the external auditor. There was discussion about the grant audit that is performed each year. The Internal Auditor explained how one of the City's smaller grants is chosen for a compliance review because the external auditor reviews only large grants as part of the single audit procedures. 5) Judy asked about the rotation of the external auditor. Paul explained that not long ago we requested proposals on the service and received only two. BKD was then selected to another multi-year contract. There was discussion that this was due to the lack of qualified auditors to perform governmental audits. 6) At the last quarterly meeting, the committee expressed interest in having a presentation of the streamlined sales tax program. Shelly Turberville and Deborah Smallwood from the Accounting division were asked to present information on this topic. Shelly first went over the percentages of sales taxes collected for the state of Arkansas, Washington County, and the City of Fayetteville. She explained the timing of sales tax collections by the state and remittance to the City. Paul and Marsha stated that taxes paid on purchases made during the month of January are recorded on the City's books as revenue in the month of February. Shelly told the committee that half of the City collections (1 %) are sent directly to the bond trustees by the state. Shelly described how the City also receives a portion of the sales taxes collected for Washington County. The portion is based on the population of Fayetteville as a percentage of county population. Paul explained that City operations are funded primarily from the City's sales tax collections - the other half (1 %) of the City sales tax and the City's portion of the Washington County sales tax. Deborah told the committee about the changes in Arkansas sales tax law which became effective on January 1, 2008, and allowed Arkansas to become part of the streamlined sales taxes program. She said that there are currently 22 states that have adopted the streamlined sales tax plan. The idea of the plan is to capture sales tax revenue on internet sales. She explained the law changes which are listed below: • Sales and use taxes (state, county, and city) are charged and remitted to the state of Arkansas based on where the purchaser takes receipt or delivery. Prior to January 1, 2008, taxes were charged and remitted based on the location of the seller. • Local tax caps on single transactions will no longer apply when retailers collect the city and county portion of the sales and use taxes. Taxes will be collected on the full amount of the transaction. Businesses, governmental agencies, schools, colleges, universities, non-profit organizations, and churches may apply for rebates of the additional local taxes paid within 6 months of the purchase. Prior to January 1, 2008, local taxes were capped at $2,500 per transaction. Deborah gave some more information about how rebates due to the local tax cap are usually deducted on a business's excise tax report form. Fayetteville has not seen any line item rebates on the sales tax distribution form from the state since the program was implemented. Therefore, we assume that all rebates related to the cap are being claimed on each business's excise tax report form. Paul explained that the City is not provided with specific information as to collections or rebates from the state. The information is not subject to the Freedom of Information Act. The City is not able to audit information related to collections, but must rely on the state to collect on our behalf and to accurately remit those collections to us. The state does have auditors who are responsible for auditing sales tax remittances throughout the state. There is currently legislation to remove the provisions of the streamlined sales tax until the streamlined sales tax is adopted nationwide. Springdale is in favor of this legislation. 7) Shelly briefly discussed HMR (hotel, motel, and restaurant) tax collection procedures in response to a question from Tony. There was also a short discussion of property taxes around the Northwest Arkansas Mall area. 8) The 2nd quarter audit committee meeting will probably be held at the beginning of June. This will be the annual meeting with the external auditors. They will present the draft audit report and discuss any Mayor, Council, and Audit Committee letter comments. The committee thanked Shelly and Deborah for attending the meeting.